Senators gave the proposed income tax a cool reception earlier today.
Anchorage Republican Senator Kevin Meyer said his constituents oppose creating a new bureaucracy to collect an income tax when the Permanent Fund continues to pay dividends.
“I think that’s the part that — I think that’s the hardest for people to accept,” Meyer said. “It’s just the inefficiencies of giving money to people and then taking it back via the income tax.”
The House passed the income tax on April 15th. The House would require the income tax and an oil and gas tax increase if the state lowers Permanent Fund dividends and draws from Permanent Fund earnings to pay for state government.
The Constitution bars the Legislature from dedicating money for future spending, but House members say the tax should be designated to fund schools.
It’s expected the income tax would raise about a quarter of the money needed to close the $2.6 billion gap between what the state spends and what it raises in taxes, fees and oil royalties.
State Tax Division chief Ken Alper said it’s important to bring the state budget into balance. Alper said if a there’s a gap in the budget like the Senate majority has proposed, then the state risks making unplanned draws from Permanent Fund earnings.
“And that’s where the biggest danger lies,” Alper said. “Because we have a Permanent Fund with very strict rules around it. Everyone knows what those rules are: We pay dividends. We generally do inflation-proofing. We fund it’s internal operations. And that’s it. If we’re going to change the way we manage the Permanent Fund, that is a generationally significant decision for Alaskans.”
The Senate Labor and Commerce Committee was scheduled to begin hearing public testimony at 6 p.m.
Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.
